Two weeks' notice: Over 2.4 million British businesses could be days away from closure

New research from Simply Business reveals the shocking impact unforeseen
disasters could have on small businesses.

Cash savings for two weeks

The research released today reveals that most small businesses only have
cash savings to last two weeks, if unforeseen circumstances were to
force them to cease trading temporarily.

The research*, conducted by YouGov on behalf of Simply Business,
revealed that more than half (52 per cent) of small businesses have a
cash reserve of £10,000 or less and three in ten (30 per cent) have £500
or less, including 20% who have no cash reserve at all. In recent years,
UK independent businesses have battled unexpected problems ranging from
riots to floods leading many businesses to cease trading permanently.

With the average monthly fixed costs for a small business estimated at
just over £20,000 if they were to cease trading, Simply Business
estimates that more than 2.4 million** of the nation’s businesses
could potentially be out of action if unforeseen circumstances forced
them to shut up shop for just two weeks.

16% of decision makers are unaware

The research revealed an even more alarming lack in knowledge from the
1000 small businesses decision makers polled. Despite one in five
running their business without any cash reserve whatsoever (20%), a
fifth believe they would be able to last at least six months (22%) if
their business had to cease trading due to an unforeseen issue, such as
a fire or a flood.

16% of small business decision makers are completely unaware of how much
cash their business has to draw upon should they cease trading
temporarily and a further 17% do not even know how much their usual
fixed monthly costs are.

Jason Stockwood: ‘We must ensure that business owners are less close to the brink’

Jason Stockwood, CEO of Simply Business, commented: “Even after last
year’s storms and flooding, which cost over £830 million of damage to
firms nationwide***, small businesses are still woefully
underprepared for unforeseen circumstances which will prevent trading.
Small business owners play a crucial role in the economic recovery, but
we must ensure they are not existing so close to the brink.”

The research also discovered considerable regional variation with
average fixed monthly costs in London at over £40,000, almost double the
nation’s average. This means that Simply Business estimate that
businesses in the capital would only be able to survive for six days
before facing closure, if they were faced with an unforeseen issue which
forced them to cease trading.

Jason Stockwood continued, “It is so encouraging to see the ever rising
number of micro businesses and sole traders being set up and successful
in the UK; however, as we have seen in the last year, just one accident
or unfortunate event can wipe out all their hard work along with their
bank balance. While being a small business means you have a great deal
of potential, it also makes you vulnerable so it is vital business
owners across the nation proactively prepare for any eventuality so they
can continue on their upwards trajectory, rather than being cut short.”

YouGov’s research also discovered that 1 in 10 (12%) small business
decision makers do not know what types of business insurance they have.
Furthermore, just 13% have business continuity and 16% have business
interruption cover.

Notes to Editors:

* YouGov carried out an online survey on behalf of Simply Business
between 7th – 11th July 2014. Total sample size was 1,015 decision
makers from small businesses (i.e. less than 50 employees) and all
figures have been weighted and are representative of British business
size.

** Based on YouGov data, the average monthly cost for small businesses
in Britain is calculated to be £23,888.98, and the average percentage
change in monthly fixed cost would be a 7.41% decrease if businesses
were to cease trading for 1 month. Simply Business calculate that the
average monthly fixed cost for businesses not trading would therefore be
£22,118.81 (£23,888.98 - 7.41%). Therefore, as 52.42% of small
businesses report no cash reserve, or a reserve £10,000 or less, we
estimate that 52.42% of the small business population in Britain would
only be able to last c.2 weeks if their business had to cease trading.
According to data from the Department for Business Innovation &
Skills, there were 4,746,235 small businesses in Britain in 2013.
Therefore, Simply Business estimate that 2,487,976 small businesses in
Britain could be c.2 weeks away from having to close down if their
business had to cease trading for an unforeseen reason (52.42% of
4,746,235 = 2,487,976).

About Simply Business

Launched in 2005, Simply Business provides an online brokerage service delivering policies tailored to individual business requirements. It has a team of UK based insurance specialists and employs almost 300 people across offices in London and Northampton.

Simply Business provides insurance to more than 400,000 UK SMEs and landlords and owing to its internal underwriting capability can cover over 1,000 trade types. It has been a Sunday Times Tech Track 100 company for the past three years and was recently named in the Deloitte Technology Fast 500 EMEA. Revenues have grown from £4.2 million in 2006, to £25.4 million in 2014, and the company has been named 2015 and 2016 winners of The Sunday Times’ Best Company to Work For.